European job market has strengths the U.S. doesn't

The Associated Press

September 4, 2014 10:56:51 AM

WASHINGTON -- Compare unemployment rates, and America's job market looks much stronger than Europe's. The U.S. rate for August, being released Friday, is expected to be a near-normal 6.1 percent. In the 18 countries that use the euro currency, by contrast, it's a collective 11.5 percent.

Yet by some measures, Europe is doing better. It's been more successful in keeping people working, letting the disabled stay on the job and boosting the proportion of women in the workforce.

And Europeans in their prime working years -- ages 25 to 54 -- are more likely to be employed than Americans are.

Fewer than 77 percent of prime-age Americans have jobs, compared with 80 percent in Belgium, 81 percent in France and 82 percent in the Netherlands, according to the Organization for Economic Cooperation and Development.

If Americans ages 25 to 54 were as likely to be working as Germans the same age, 8.3 million more Americans would have jobs.

"Where we used to talk about the U.S. having a high-powered labor market in the late 1990s, Germany has that now," says Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.

It's true, of course, that the unemployed have a much harder time finding a job in, say, Spain or Greece than the United States. Spain's unemployment rate is nearly 25 percent. For people under 25, the rate tops 50 percent.

Though the eurozone's overall unemployment rate is 11.5 percent, individual countries include low-rate nations like Germany and Austria (4.9 percent) as well as some with much higher unemployment than the United States: Portugal (14 percent), Italy (12.6 percent), France (10.3 percent), Belgium (8.5 percent).

Yet Josh Bivens, research director at the liberal Economic Policy Institute, says America's relatively low "headline unemployment rate is painting too rosy a picture of how the U.S. labor market is doing."

The fall in the U.S. unemployment rate has been exaggerated by rising numbers of adults neither working nor looking for work. The government counts people as unemployed only if they're looking for a job. When many stop looking, the unemployment rate can fall even if few people are hired.

The share of Americans ages 16 to 64 either working or seeking work has fallen to 72.7 percent from 75.3 percent at the end of 2007, when the Great Recession began. In the 28 countries in the European Union, the figure has risen to 72.3 percent from 70.5 percent in late 2007. The United States and Europe calculate their employment rates in broadly similar ways.

No single reason explains why prime-age employment and workforce participation trends are weaker in the United States. But among the factors:

AMERICAN WORKERS GET LAID OFF

Europe better protects prime-age workers. "There's nowhere in Europe where you can just fire a worker," says Dean Baker, co-director of the liberal Center for Economic and Policy Research.

By contrast, "it's very easy for companies to fire workers in the U.S.," Kirkegaard said.

Judith Carney, 50, of Morgan Hill, California, lost her job at a defense manufacturer in January. She's been looking for work since.

"I am very scared that I won't find a job and that I will lose my town house," Carney said.

By contrast, Frederic Furman, 28, who manages an Indonesian restaurant in Paris, says job security is ingrained in French culture. "It's not something I think about," he said at his restaurant near the bustling Grands Boulevards. Full-time job contracts make it difficult and expensive for employers to shed staff.

Those job protections can have a downside, though: Companies are less likely to hire workers if they know they can never get rid of them.

DISABLED EUROPEANS STILL WORK

The U.S. disability program forces many ailing Americans to choose between working and collecting disability. The number receiving disability payments from Social Security has gone from 7.1 million at the end of 2007 to 8.9 million.

European countries make it easier for people to strike a balance between work and time away.

"The U.S. system has a strong bias that insists (on) looking at disability as a static or permanent condition," says Ilene Zeitzer, a former Social Security Administration official. "Either the person is so disabled (he or she) cannot work or they are not that disabled and thus they are denied benefits."

In European countries such as Sweden, by contrast, workers can take sick leave and then transfer if necessary to temporary disability.

OLDER EUROPEAN WOMEN ARE WORKING MORE

Though American and European women are similarly likely to be working or seeking work, in Europe the percentage is climbing. In the United States, it's falling.

Researchers at the Federal Reserve Bank of New York have found the trend pronounced among European women 45 and older: The percentage working or looking for work has risen 2 percentage points in four years. For American women, that percentage has dropped.

Kirkegaard says one reason could be the need to care for aging parents.

That need "is a lot less prevalent in Europe" because such services are more likely to be paid for by government programs, he says. Such generous social programs are supported by Europe's higher tax rates.

EUROPE REFORMS BRING PART-TIMERS AND TEMPS

Spain, France, Germany and Italy have eased rules that had made it hard for companies to hire part-time and temporary workers. The loosened rules have enabled more Europeans to find work.

Beginning in 2003, Germany cut the duration of unemployment benefits, raised the retirement age and eased restrictions on temporary staffing agencies. It also required the unemployed to actively seek work to receive benefits.

Likewise, Spain cut unemployment benefits and made it easier for companies to hire part-timers and temps. And in 2012, Italy made it easier to hire workers on short-term contracts.